Confessions of a CEO – ‘Pushing the boundaries of risk’

Azran Osman Rani, CEO of Air Asia X explains how they made the impossible happen by walking the path less ventured. Air Asia X chose to do what other airlines failed to do successfully. The key was to try and never give up. In this inspiring session, Azran explains how Air Asia X questioned the basic operating model for any airline. He highlights “Air Asia X, runs on 2.1 litres per seat per 100 kms. So if you fly Air Asia X, you are burning less carbon than a passenger car”. He also confesses that scaling up and retaining the existing unique culture of Air Asia X is what keeps him up at night.

Confessions of a CEO

Azran Osman Rani: We launched a business model, the low cost over long haul which everyone said is impossible to do. All the experts in the industry, the big global giants, Ryanair, South West, EasyJet, all said we don’t do this, everyone who has tried to do it has successfully failed and we pushed the boundaries of risk so far we’re now into the realm of insanity.

We had to literally set up a separate company, get our own licenses and most importantly to invest in something that was very capital intensive we had to match it with a different set of shareholders. Shareholders who were much more private equity venture capital and who were risk takers. You have to match your risk capital with the riskiness of the new venture.

We started by questioning every single assumption, and that was my only qualification coming into this role, which was to basically ask why and why not? And we turned everything upside down, kept challenging ourselves to the nth degree and figure out why is it that other airlines do this? Is there a real reason? And always coming back down to the first principle of what is it that the customer really needs versus the nice to have, and reconstructing an entirely new airline model that no one had really thought about.

We didn’t have the answers and no one has all the answers, there is no best practice, we were writing the rules as we went along. So with that as the premise the culture from day one was try, move fast, we believe the philosophy is do ten things. Get 6 or 7 right, then we’re doing well. The key is when those 3 or 4 things go wrong just change tack fast, don’t worry about what went wrong or who was to blame, just keep on going ahead.

Going from 5 years ago we just had this crazy idea, starting it up and now we’re actually moderately successful. We’re planning an IPO because we want more money and more capital to grow. And suddenly we now have to think about how we have to behave as a public listed company.

The PWC people are coming in and saying you have to have a risk management system. It sets this tone whereby we have to identify our risks and then figure out how we mitigate it, it forces you to think about commonality or conformity with how other people do it. One of the big risks that the PWC people bring up is oil prices. We then thought that the answer isn’t so much about whether you hedge or not because you might gain plus or minus 5-10%, but can you radically change the amount of fuel you burn per passenger? So we focused on a whole bunch of unique initiatives towards efficiency. Today for example at AirAsia X I don’t know of any other airline that runs at 2.1litres per seat per 100 kilometers. So if you fly Air Asia X you’re burning less carbon than a Toyota Prius.

It’s interesting because as a leader I feel the one thing that really keeps me up at night is figuring out how do you keep that unique culture of being open and being willing to accept and question, alive. I worry about that so much more than I do about any of the other external stuff, the oil prices, the global financial crisis and all the rest because that is just about circumstance and if we out exude the competition and deal with it. But our ability to out exude the competition means we always have to be this nimble and adjusting and while it works while we’re a smaller team how do we scale that up? Especially once we start becoming global.